In South Africa, AI's influence is growing steadily, with the government planning to invest R70-billion in the technology by 2030. Its potential for businesses is enormous. Yet, for marketing agencies and other professional service providers, it raises one critical challenge: Pricing.

What pricing model does your agency use?

For the vast majority of marketing agencies, the answer is time / effort-based pricing — or some variation of it. It's a model that has been standard in the industry for decades, largely because it's simple and expected by clients. However, it's becoming increasingly clear that this approach is fundamentally incompatible with the efficiencies brought by AI.

If AI reduces the time and effort needed to deliver your projects, the logical consequence is that your billable hours also decrease. For agencies, this means shrinking revenues and a potential devaluation of services in clients' eyes.

So, what do you do? Avoid using AI altogether? Quietly incorporate AI and hope clients don't notice? Accept reduced invoices, even as your outputs improve? Or explore a new way to price your work?

Moving to a New Era of Pricing

Time / effort-based pricing has endured because it's familiar. Clients understand it, and it's easy to implement. However, it has never been the best way to communicate the true value of your work. After all, what does the time you spend really mean to your clients?

Deliverable-based pricing, also known as asset, solution or outcome-based pricing, shifts the conversation away from time and effort and onto value. By assigning a clear value to each of the services you provide, you're no longer tethered to hours worked, freeing you to use AI and other technologies without devaluing your work. It also gives clients greater clarity on what they're paying for, enhancing their perception of your agency and its offerings.

This approach not only future-proofs your pricing model but positions your agency as results-driven and innovative. When you remove the emphasis on time and focus instead on what your clients gain from your expertise, you create a pricing strategy that's both practical and compelling.

How to Adopt Deliverable-Based Pricing

Switching to a new pricing model may seem daunting, but it's a process that brings significant benefits. Agencies typically begin by creating a framework that outlines their services in detail. This collaborative effort allows you to break down what your business does at a granular level and ensures your pricing reflects the value of your outputs.

You may also choose to consult with external pricing experts to refine this framework and ensure it aligns with market expectations. Once established, various tools, such as configure, price and quote (CPQ) software, can help streamline the adoption and implementation of your new model.

According to the Simon Kucher Institute, the rapid rise of AI has left most professional services firms unprepared for the changes it demands. While this adjustment may seem like a disruption, it's also a chance to rethink how your agency operates. By adopting deliverable-based pricing, you're not just addressing the challenges posed by AI — you're seizing an opportunity to redefine your value and set your agency apart.

AI is forcing change but it's also offering agencies a way to stand out. Those who adapt early will be best positioned to thrive in a world where results matter more than hours worked.

For more information, visit www.scopebetter.com. You can also follow SCOPE Better on LinkedIn. 

*Image courtesy of LinkedIn